I focus on the strategic, economic and business implications of defense spending as the Chief Operating Officer of the non-profit Lexington Institute and Chief Executive Officer of Source Associates. Prior to holding my present positions, I was Deputy Director of the Security Studies Program at Georgetown University and taught graduate-level courses in strategy, technology and media affairs at Georgetown. I have also taught at Harvard University's Kennedy School of Government. I hold doctoral and masters degrees in government from Georgetown University and a bachelor of science degree in political science from Northeastern University. Disclosure: The Lexington Institute receives funding from many of the nation’s leading defense contractors, including Boeing, Lockheed Martin, Raytheon and United Technologies.

As Pentagon Buys Fewer New Weapons, Repair Of Old Ones Becomes A Battleground

One way of defusing the political tensions surrounding allocation of maintenance work is to fashion public-private partnerships where depots and companies establish a division of labor to deliver the best results. For example, the Boeing Company last year entered into a performance-based partnership with the Air Force’s logistics centers to provide long-term life-cycle sustainment of the C-17 airlifter. The contract, which includes both supply-chain management and depot-maintenance support, could eventually be worth over $11 billion to the company.

However, it isn’t likely that innovations like public-private partnerships and performance-based logistics will lead Congress to loosen the restrictions it has imposed on how depot maintenance can be performed. Public-sector depots typically provide better pay and benefits to their employees than private companies involved in similar work, and in many places such as Central Georgia and Northeastern Pennsylvania the local military depot is the biggest regional employer. Public-sector unions will pressure depot managers and congressional delegations to protect government jobs even if it means forcing the military to pay more for services.

Depot maintenance is thus the latest setting in which military contractors are being reminded of a key fact about their government customer: that customer isn’t a military service or a defense agency, it’s a political system. The fact that an original equipment manufacturer is more capable and less costly as the provider of hardware or software upgrades on a complex piece of equipment just doesn’t matter as much to the New Hampshire or Utah congressional delegations as it would to a for-profit enterprise. The congressional delegations want to know where the jobs (and the votes) are before they submit to the verdict of a business-case analysis.

There are numerous reasons why it would make fiscal and economic sense for the Pentagon to award most depot maintenance to the same companies that developed and manufactured weapons systems. The current approach of building in the private sector and maintaining in the public sector increases federal costs, fractures product life-cycles, diminishes economies of scale, impedes technological innovation and undermines trade competitiveness. Unlike the Boeings and General Dynamics of the world, military depots don’t sell into commercial markets and don’t export, so investments made in their workforces and facilities have less of an economic multiplier effect than the same investments made in companies.

But that’s not the way the political system sees things. It is less interested in eliminating market distortions than in protecting favored constituencies that might have an impact on election outcomes. So even though the current period of waning threats and declining military outlays would seem like an excellent time to rationalize the defense industrial base by transitioning to an integrated life-cycle approach in building and sustaining military equipment, there isn’t much indication that is going to happen. Congress and the military services would rather pay more for less than embrace the harsh logic that leads companies to continuously trim costs.

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